Connected Cars: 10 Tough Problems Automakers Must Solve

You might wonder what cars will look like in a decade, or how they'll be powered. But one thing you can be certain of: they'll be connected to the internet.

Web-linked cars are the next digital frontier and key to the auto industry's efforts to attract younger, tech-savvy car buyers. It's not just about accessing email or Twitter. Connected cars will be able to help drivers navigate the best route home at rush hour, automatically schedule maintenance appointments and even order and pay for takeout food.

The business opportunity is enormous for both automakers and mobile operators, who will increasingly need to work together.
IHS Automotive forecasts revenue for connected vehicle services over the next decade of $50 billion from in-vehicle mobile advertising, $500 billion from vehicle maintenance, $5 billion from service subscriptions, and billions more in fuel savings.

Government regulators, meanwhile, see connected cars as a way to alleviate congestion by giving motorists up-to-the-minute information they can use to make smart choices to reduce travel delays. Vehicles would "talk" to each other and to traffic signals, work zones, toll booths, school zones, and other types of infrastructure over Dedicated Short Range Communications (DSRC)—a technology similar to Wi-Fi.

More important, connected cars have the potential to dramatically reduce the 1.2 million traffic deaths that occur worldwide each year, says the National Highway National Highway Traffic Safety Administration. The technology could help prevent many typical accidents -- at intersections or while changing lanes, for example, by issuing warnings of an imminent crash to the driver.

It's all very promising, but multiple challenges remain: who will pay for all this technology? And how? And will it cut down on driver distraction? Or make it worse?

Machina Research and Telefónica Digital, the London-based digital arm of the Spanish telecommunications provider, surveyed the world's top automakers about what's needed to put a web connection in every vehicle. Telefonica clearly has a vested interest: its mission is to find new revenue opportunities for the company in the digital world. But its Connected Cars Industry 2013 report is unique for its in-depth interviews with senior management at many of the top global automakers, such as Cadillac's vice president of marketing, Don Butler (read here) and Ian Digman, a general manager for Nissan Europe (read here).

Automakers are concerned about everything from how web services will be paid for to what what will happen if they open the car to third-party providers. "Service bundles, delivery channels, product pipelines, pricing and customer support will be heavily impacted, and in some cases new business models will need to be created from scratch as the dynamic between manufacturer, dealer and customer evolves," the report said.